{"id":162608,"date":"2025-08-13T18:21:54","date_gmt":"2025-08-13T18:21:54","guid":{"rendered":"https:\/\/teknomers.com\/en\/the-collapse-of-terrausd-resulted-in-a-loss-of-40-billion-and-affected-thousands-of-investors-its-creator-has-just-admitted-to-deception\/"},"modified":"2025-08-13T18:21:55","modified_gmt":"2025-08-13T18:21:55","slug":"the-collapse-of-terrausd-resulted-in-a-loss-of-40-billion-and-affected-thousands-of-investors-its-creator-has-just-admitted-to-deception","status":"publish","type":"post","link":"https:\/\/teknomers.com\/en\/the-collapse-of-terrausd-resulted-in-a-loss-of-40-billion-and-affected-thousands-of-investors-its-creator-has-just-admitted-to-deception\/","title":{"rendered":"The collapse of TerraUSD resulted in a loss of $40 billion and affected thousands of investors. Its creator has just admitted to deception."},"content":{"rendered":"\n

The \u00a0implosion of TerraUSD\u00a0 and Luna rocked the cryptocurrency world, leading to a devastating confession by Do Kwon, the mastermind behind these coins. Kwon, who was once celebrated for spearheading a potential \u00a0financial revolution\u00a0, has now faced the music, acknowledging his role in a staggering \u00a0$40 billion\u00a0 fraud. On August 12, 2025, in a \u00a0Federal Court in New York\u00a0, he pleaded guilty to two counts: conspiracy to commit fraud involving commodities, securities, and electronic fraud. The scandal erupted in 2022 when his supposedly \u00a0stable cryptocurrencies\u00a0 plummeted in value. “What I did was wrong,” Kwon expressed in court, echoing sentiments felt across the cryptocurrency landscape as investors reeled from the fallout.<\/p>\n

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During his court statements, Kwon admitted to misleading investors by failing to reveal a trading firm’s involvement in bolstering TerraUSD’s value. His guilty plea was part of an agreement with the \u00a0Prosecutor’s Office of the Southern District of New York\u00a0, which is seeking a maximum sentence of \u00a012 years\u00a0 if Kwon fully cooperates. After being extradited from Montenegro in late 2024, Kwon faced multiple charges, which included securities fraud and conspiracy for money laundering. His admission came nearly three years after the catastrophic collapse of his innovative financial project.<\/p>\n

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How the ‘PEG’ was Manufactured and How It Collapsed<\/h2>\n

Unlike typical stablecoins that are collateralized by tangible assets, \u00a0TerraUSD\u00a0 relied on a unique algorithm designed to maintain parity with the U.S. dollar through interactions with its partner cryptocurrency, \u00a0Luna\u00a0. If TerraUSD dipped below the dollar, users could exchange it for Luna, theoretically decreasing the supply and stabilizing the value. This process was part of the \u00a0Terra Protocol\u00a0, which operated autonomously to manage token supply based on market dynamics.<\/p>\n

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The first warning sign appeared in May 2021 when TerraUSD faltered below its $1 target. Kwon insisted that the system functioned correctly, claiming the algorithm had swiftly restored parity. However, he recently acknowledged that he had \u00a0engaged a specialized trading firm\u00a0 to purchase significant amounts of TerraUSD to secure its price. Such maneuvers were hidden from the public, misleading investors regarding the stability of the system. This admission cast a shadow over Kwon’s credibility and the principles he had initially championed.<\/p>\n

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By May 2022, the situation deteriorated, resulting in an irreversible collapse of TerraUSD’s value. The very algorithm designed to sustain stability backfired when the massive influx of Luna tokens caused a deleterious spiral. This led to the \u00a0dramatic devaluation\u00a0 of both cryptocurrencies, wiping out an estimated \u00a0$40 billion\u00a0 in market capitalization. The immediate loss of faith transformed what was once viewed as a cutting-edge stablecoin into a cautionary tale of fragility.<\/p>\n

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The civil aspect of Kwon’s case was resolved in April 2024 when a federal jury found him and \u00a0Terraft Labs\u00a0 liable for fraud in a lawsuit initiated by the SEC. The civil ruling resulted in an \u00a0$80 million\u00a0 penalty, alongside a lifetime ban on engaging with cryptocurrencies. Terraft Labs also agreed to reimburse \u00a0$4.55 billion\u00a0 as part of the resolution. By that time, the company had filed for \u00a0Chapter 11 Bankruptcy\u00a0, complicating the compensation process for those affected.<\/p>\n

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While Kwon could face up to \u00a025 years in prison\u00a0, his cooperation with authorities might reduce the effective term to as little as \u00a012 years\u00a0. Federal Judge \u00a0Paul A. Engelmayer\u00a0 is set to deliver a verdict on December 11, 2025. Reports indicate that the prosecution may not contest Kwon’s request for transfer to another country after serving half of his sentence. Additionally, South Korean authorities have pending charges that may be activated once his U.S. case is concluded.<\/p>\n

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The collapse of TerraUSD and Luna ensnared a diverse group of investors, from both individual savers to large institutional funds. As \u00a0Terraft Labs\u00a0 navigates its bankruptcy proceedings, estimates suggest it may compensate affected parties between \u00a0$184.5 million\u00a0 and \u00a0$442.2 million\u00a0 as part of its liquidation plan. However, the current volatility of the cryptocurrency market dramatically impacts the recoverable amounts, meaning any refunds, if issued, will likely be partial and delayed.<\/p>\n

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Images | FAQX \u2122 We Mining it.<\/a> (CC by 3.0<\/a>) | Art Rachen<\/a> | Joshua May<\/a><\/p>\n

The repercussions of this cryptocurrency scandal continue to reverberate throughout the financial landscape, leaving regulators scrambling to impose stricter controls and investors reassessing their positions in a market once dominated by the allure of easy wealth.<\/p>\n


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General News – 2<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The \u00a0implosion of TerraUSD\u00a0 and Luna rocked the cryptocurrency world, leading to a devastating confession by Do Kwon, the mastermind behind these coins. Kwon, who was once celebrated for spearheading a potential \u00a0financial revolution\u00a0, has now faced the music, acknowledging his role in a staggering \u00a0$40 billion\u00a0 fraud. On August 12, 2025, in a \u00a0Federal […]<\/p>\n","protected":false},"author":1,"featured_media":162609,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36399],"tags":[4563,988,377,976,23146,34181,3912,1739,7085,40473,207],"class_list":["post-162608","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology","tag-admitted","tag-affected","tag-billion","tag-collapse","tag-creator","tag-deception","tag-investors","tag-loss","tag-resulted","tag-terrausd","tag-thousands"],"_links":{"self":[{"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/posts\/162608","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/comments?post=162608"}],"version-history":[{"count":0,"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/posts\/162608\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/media\/162609"}],"wp:attachment":[{"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/media?parent=162608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/categories?post=162608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/teknomers.com\/en\/wp-json\/wp\/v2\/tags?post=162608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}